How the Takaful Model Works: Contributions, Funds, and Surplus Distribution

Takaful is one of the most misunderstood financial products in the Islamic finance industry. It is commonly described as "Islamic insurance" and left at that — as though it were simply conventional insurance with the word "interest" removed and an Arabic name applied. That description is accurate enough to be recognised and inaccurate enough to cause real confusion when professionals try to understand what they are actually managing, selling, or governing.

The Takaful model is structurally different from conventional insurance. The difference is not cosmetic. It runs through the legal foundation of the contract, the flow of contributions and funds, the relationship between the operator and the participants, and the treatment of any financial surplus that remains at the end of an accounting period. Professionals who understand these structural differences can manage Takaful operations effectively, design compliant products, and govern the model responsibly. Professionals who treat Takaful as insurance-with-a-different-name make decisions that are commercially suboptimal and sometimes Sharia non-compliant.

This article explains how the Takaful model actually works — the contributions, the funds, the operator relationship, the investment activity, and the surplus distribution that most people in the industry get wrong.

Why Conventional Insurance Is Not Sharia-Compliant — and Why That Matters for Understanding Takaful

The starting point for understanding Takaful is understanding what is wrong with conventional insurance from a Sharia perspective. The problems are structural, not incidental — which is why Takaful requires a fundamentally different model rather than a modified version of conventional insurance.

The three Sharia problems with conventional insurance

• Gharar (excessive uncertainty): In a conventional insurance contract, the policyholder pays a premium and receives, in return, a promise of compensation if a specified loss occurs. The benefit is contingent — it may or may not materialise. The amount of compensation is uncertain at the point of contracting. The insurer collects premiums from many policyholders knowing that it will pay claims to some but cannot know which ones or how much. This contractual uncertainty — where one party's obligation is unknowable at the time the contract is formed — is the prohibited Gharar that renders conventional insurance contracts problematic under Sharia.
• Maysir (gambling): The conventional insurance contract has a zero-sum character. If no loss occurs, the insurer retains the premium and the policyholder receives nothing. If a loss occurs, the insurer pays more than it received. The financial outcome for each party depends on an uncertain future event. This structure resembles gambling — one party gains at the other's expense, determined by chance — which is the prohibited Maysir.
• Riba (interest): Conventional insurers invest premium income in interest-bearing instruments. The investment returns generated from those instruments, and the commercial profit the insurer earns from underwriting, involve Riba in a form that is prohibited under Sharia.

What the Takaful model replaces these with

Takaful solves all three problems through a structural redesign of the insurance relationship. The conditional bilateral insurance contract is replaced by a mutual contribution system — participants contribute to a shared fund rather than paying premiums to an insurer. The insurer's risk-underwriting role is replaced by a Takaful operator that manages the fund for a fee. The surplus that remains in the fund after claims and expenses belongs to the participants, not to a commercial shareholder entity. Each of these changes removes one of the three Sharia problems. Together, they produce a model that is substantively different from conventional insurance — not just differently labelled.

The Takaful Contribution: What Participants Are Actually Doing

In conventional insurance, a policyholder pays a premium. The premium is a price — consideration for the insurer's contractual obligation to indemnify losses. The money belongs to the insurer from the moment it is paid.

In Takaful, a participant makes a contribution. The distinction is not linguistic. It is legal and financial.

The nature of the Takaful contribution

• The contribution is made on the basis of Tabarru — a donation or gift. The participant voluntarily contributes to a common pool for the purpose of mutual assistance. They are not buying a service from the operator. They are contributing to a fund from which fellow participants who suffer losses will be indemnified.
• Because the contribution is a Tabarru, the participant does not retain ownership of the money once contributed. It belongs to the pool. This removes the Gharar problem — the participant is not entering a bilateral contract with uncertain obligations. They are making a donation to a mutual fund with a clear charitable intent.
• The Tabarru concept also changes the legal relationship between the participant and the operator. The operator does not own the contributions. It manages them on behalf of the participants as a collective.
• In Family Takaful (long-term, analogous to life insurance), the contribution is typically split between the Tabarru portion — which enters the risk pool — and a savings or investment portion which belongs to the individual participant and is managed separately in their personal account (the Participant's Investment Account, or PIA).

How contribution pricing works in Takaful

Takaful contribution rates are calculated actuarially, just as conventional insurance premiums are. The operator uses mortality tables, morbidity data, claims history, and risk assessment to determine the contribution level required to fund expected claims, maintain the fund's solvency, and meet regulatory capital requirements. The calculation methodology is broadly similar to conventional insurance pricing. The legal structure of what the contribution represents is fundamentally different.

The Two Fund Structure: Participants' Risk Fund and Shareholders' Fund

The most important structural feature of the Takaful model — and the one most critical to understanding how it operates and is governed — is the strict separation between two distinct funds that must never be commingled.

The Participants' Risk Fund (PRF)

The Participants' Risk Fund — sometimes called the Takaful Fund or the Waqf Fund in certain models — is the common pool into which participants' Tabarru contributions flow. This fund:

• Is collectively owned by the participants, not by the Takaful operator or its shareholders
• Is used exclusively to pay claims to participants who suffer covered losses
• Covers the management expenses and retakaful costs attributable to the risk pool
• Is invested on behalf of the participants in Sharia-compliant investment instruments, with investment returns credited back to the fund
• Must be maintained at a level sufficient to meet expected claims and regulatory solvency requirements
• Generates a surplus or incurs a deficit at the end of each accounting period, depending on the claims experience — and the treatment of that surplus or deficit is one of the most contested and significant aspects of Takaful model design

The Shareholders' Fund

The Shareholders' Fund is the capital contributed by the Takaful operator's shareholders — the commercial entity that established and operates the Takaful business. This fund:

• Is the source of the operator's capital base and the mechanism through which shareholders hold their equity interest in the Takaful company
• Is separate from the participants' contributions and cannot be mixed with the PRF
• Generates returns for shareholders through the fees the operator earns for managing the PRF — not through underwriting profit on participant contributions
• Is invested separately from the PRF in Sharia-compliant instruments
• Serves as the source of a Qard Hassan (interest-free loan) to the PRF if the fund falls into deficit — meaning the shareholders fund provides a financial backstop for the participants' fund without charging interest

Why the separation matters in practice

The separation of the two funds is not merely a technical accounting requirement. It is the structural expression of the Takaful model's core principle: the operator manages the participants' money on their behalf and earns a fee for doing so, but does not own that money and does not profit from underwriting their risks. An operator that commingles the funds — or that structures fees in ways that effectively transfer underwriting profit to the shareholders — is violating the Sharia basis of the model. Regulators in mature Takaful markets treat fund separation as a non-negotiable compliance requirement and audit it rigorously.

The Operator Models: How the Takaful Operator Earns Its Return

The Takaful operator provides management services to the participants' fund. It does not underwrite risk — that is the participants' collective function through their mutual contributions. The mechanism through which the operator is compensated for its management services varies by model, and the choice of model has significant implications for how surplus is calculated and distributed.

The Wakala model

In the Wakala model, the operator acts as a Wakil — an agent — on behalf of the participants. The operator charges a Wakala fee, expressed as a percentage of contributions received, for its agency services. The fee is charged upfront, before the contribution enters the risk fund.

• The Wakala fee typically covers the operator's underwriting management expenses — policy administration, claims management, risk assessment, and regulatory compliance
• Any surplus remaining in the PRF after claims and expenses is entirely attributable to the participants — the operator has already been compensated through the Wakala fee and has no further claim on the fund's surplus
• The operator may additionally charge a performance fee on investment returns generated within the PRF, expressed as a Ju'alah (reward) for achieving investment targets
• The Wakala model is the dominant model in the GCC and is favoured by AAOIFI standards

The Mudarabah model

In the Mudarabah model, the operator acts as a Mudarib — a working partner — and shares in the profits generated by the Takaful fund's investment and underwriting activities. The operator does not charge a fixed upfront fee. Instead, it receives a pre-agreed share of any surplus generated by the fund.

• The profit-sharing ratio between the operator (as Mudarib) and the participants (as Rab al-Mal) is agreed and disclosed in advance
• If the fund generates no surplus — because claims are high — the operator earns no Mudarabah profit, though it may have incurred management costs. This creates a stronger alignment of interests between the operator and participants than the Wakala fee model
• The Mudarabah model was more common in early Takaful markets, particularly in Malaysia, but has become less prevalent as regulators have raised questions about whether underwriting surplus constitutes investment profit eligible for Mudarabah profit-sharing

The hybrid Wakala-Mudarabah model

The hybrid model — now the most common internationally — combines elements of both:

• The operator charges a Wakala fee on contributions received, compensating it for underwriting management services
• The operator additionally charges a Mudarabah profit share on investment returns generated within the PRF, compensating it for investment management services
• The underwriting surplus — after claims, expenses, and the Wakala fee — belongs entirely to the participants
• This structure separates compensation for underwriting management (Wakala) from compensation for investment management (Mudarabah), which is considered a cleaner Sharia structure than pure Mudarabah on the combined underwriting and investment result

Investment of Takaful Funds: The Sharia Constraints and the Practical Implications

Both the Participants' Risk Fund and the Shareholders' Fund must be invested in Sharia-compliant instruments. This constraint affects the investment universe available to Takaful operators and has direct implications for fund yield, duration management, and asset-liability matching.

The Sharia-compliant investment instruments available to Takaful funds

• Sukuk: Islamic bonds that represent ownership interests in or rights over real assets, with returns derived from the performance of those assets rather than from interest payments. Sukuk are the primary fixed-income instrument for Takaful fund investment and are issued by governments, financial institutions, and corporations across major Islamic finance markets.
• Sharia-compliant equities: Shares in companies that pass Islamic investment screening — excluding businesses whose primary activities involve alcohol, pork, conventional finance, gambling, tobacco, and other prohibited categories, and whose financial ratios meet leverage and interest-income thresholds
• Islamic money market instruments: Short-term Sharia-compliant instruments including commodity Murabaha, Wakala deposits, and Islamic treasury bills, used for liquidity management
• Real estate: Direct property investment and Islamic real estate investment trusts (REITs) where the underlying assets and financing structures are Sharia-compliant
• Islamic private equity and infrastructure funds: Equity participations in Sharia-compliant businesses and infrastructure projects

The asset-liability matching challenge

Takaful operators face the same asset-liability matching challenge as conventional insurers — aligning the duration of investment assets with the expected timing of claims liabilities — but with a more constrained investment universe. The Sukuk market, while growing, remains less liquid and less diverse than the conventional bond market. Islamic money market instruments have shorter durations than many Takaful funds require for long-term liability matching. These constraints mean that Takaful investment management requires both Sharia knowledge and sophisticated fixed-income and actuarial expertise simultaneously — a combination that remains scarce in many markets.

Surplus Distribution: The Question That Defines the Model

Surplus distribution is the most commercially significant and the most frequently misunderstood aspect of the Takaful model. It is where the structural difference between Takaful and conventional insurance is most visible — and where the governance and Sharia compliance implications are most consequential.

What the Takaful surplus is

The Participants' Risk Fund surplus is the amount remaining in the PRF at the end of an accounting period after all claims paid, retakaful costs, management expenses charged to the fund, and any provisions for outstanding claims are deducted. It is the financial benefit of the participants' mutual assistance arrangement performing better than expected — fewer claims than projected, or lower claim costs than anticipated.

Who owns the surplus — and why this is the defining question

In conventional insurance, underwriting profit belongs to the insurer's shareholders. The policyholder paid a premium and received coverage. Any profit the insurer makes from that coverage is the insurer's commercial return.

In Takaful, the surplus belongs to the participants. They contributed to the risk pool collectively. The pool performed well. The financial benefit of that performance is theirs. The operator earned its return through the Wakala fee and/or Mudarabah profit share on investments. It has no claim on the underwriting surplus.

How surplus is distributed in practice

• Full distribution to participants: The entire surplus is distributed to participants who did not make claims during the period, proportional to their contributions. This is the most straightforward approach and the one most aligned with the mutual assistance principle.
• Partial distribution with retention: A portion of the surplus is distributed to participants and a portion is retained in the PRF to strengthen its reserves against future adverse claims experience. The proportion retained versus distributed is a governance decision that must be disclosed to participants and approved by the Sharia Supervisory Board.
• Retention with carryforward: In markets or periods of uncertain claims experience, the operator may retain the full surplus in the PRF, carrying it forward to the next period as a reserve. This is prudent from a solvency perspective but requires clear governance and transparent disclosure to participants.
• Distribution formula variations: Some operators distribute surplus only to participants who did not make claims during the year — the argument being that participants who claimed have already received their benefit. Others distribute to all participants regardless of claims status, on the basis that the contribution was a Tabarru and all participants are equally members of the mutual pool.

The deficit scenario: Qard Hassan and its governance implications

If the PRF falls into deficit — because claims exceed contributions and investment returns — the operator is obligated to provide a Qard Hassan to the fund: an interest-free loan from the Shareholders' Fund to cover the shortfall. The participants' obligations are not affected. Future surpluses in the PRF are used to repay the Qard Hassan before any surplus is distributed to participants.

The Qard Hassan obligation is the mechanism through which the shareholders bear the commercial risk of establishing a Takaful operation — if the fund persistently underperforms, the shareholders must continue to provide interest-free loans. This creates the appropriate incentive for the operator to manage the fund prudently and price contributions adequately. It also creates a governance question: how large can the Qard Hassan balance grow before the operator's financial position is threatened, and what are the participants' rights if the operator cannot honour its Qard Hassan obligation?

Retakaful: The Risk Transfer Mechanism Within the Takaful Ecosystem

Conventional insurers manage their risk concentration through reinsurance — transferring portions of large or catastrophic risks to specialist reinsurers. Takaful operators require an equivalent mechanism that is itself Sharia-compliant. That mechanism is Retakaful.

How Retakaful works

• Retakaful operators receive contributions from Takaful operators on the same Tabarru basis as individual participants contribute to Takaful funds — the primary Takaful operator contributes to the Retakaful pool rather than paying a reinsurance premium
• Claims that exceed the primary Takaful fund's retention limit are indemnified from the Retakaful fund
• Retakaful operators apply the same operator models — Wakala, Mudarabah, or hybrid — as primary Takaful operators
• Surplus in the Retakaful fund is distributed back to cedants (primary Takaful operators) on the same principles as participant surplus distribution in primary Takaful

The Retakaful capacity problem

The Retakaful market has grown significantly but remains smaller and less diverse than the conventional reinsurance market. Takaful operators in markets with limited Retakaful capacity often face a practical choice between using conventional reinsurance — which is accepted by some scholars as a necessity (Darura) where Sharia-compliant alternatives are genuinely unavailable — and accepting higher concentration risk within their own fund. This remains one of the unresolved practical challenges of the Takaful model's development.

Corporate Governance in Takaful: The Dual Governance Obligation

Takaful operators operate under a dual governance obligation that has no precise equivalent in conventional insurance. They must meet the standards of conventional corporate governance — board oversight, risk management, financial controls, regulatory compliance — and simultaneously maintain the Sharia governance framework that validates the Islamic basis of everything they do.

The unique governance challenges Takaful operators face

• Fund separation enforcement: Boards must ensure that the PRF and Shareholders' Fund are genuinely separate — in accounting, in investment management, in expense allocation, and in surplus and deficit treatment. The governance failure most likely to invalidate a Takaful operation's Sharia basis is the commingling or cross-subsidisation of these funds without proper disclosure and Sharia approval.
• Surplus distribution governance: The board's decision on how surplus is distributed — to whom, in what proportion, and on what timeline — must be transparent, disclosed in advance to participants, and consistent with the approved Sharia model. Boards that treat surplus distribution as a purely commercial decision, without participant-centric governance, are operating outside the spirit of the model.
• Sharia Supervisory Board integration: The SSB is not an advisory afterthought. It is a governance body whose decisions determine the Sharia validity of the operator's products and practices. Boards that treat SSB approval as a rubber stamp, or that present products to the SSB only after commercial decisions have been made, create the conditions for governance failures that emerge under regulatory scrutiny.
• Participant rights disclosure: Participants in a Takaful scheme have rights — to surplus distribution, to information about how their contributions are invested, to Qard Hassan protection if the fund is in deficit — that conventional insurance policyholders do not have. Governance frameworks must protect these rights proactively, not just reactively.
• Capital adequacy and solvency: Takaful regulators in most markets apply solvency requirements to both the PRF and the Shareholders' Fund separately. Boards must monitor both, manage the Qard Hassan balance, and ensure the operator has sufficient capital to honour its obligations to participants under adverse scenarios.

The governance of Takaful operations at this level of complexity — spanning conventional board accountability, Sharia compliance, participant rights, regulatory solvency, and the dual fund structure — is the subject of the Corporate Governance for Takaful Operators Training Course at COPEX Training, which addresses how boards, senior leaders, and governance professionals can build and maintain the governance frameworks that Takaful operations require — combining international corporate governance principles with the Sharia-specific governance demands of the model.

Family Takaful versus General Takaful: How the Model Varies by Product Type

Takaful products fall into two broad categories that parallel the conventional insurance distinction between life insurance and general (non-life) insurance. The Takaful model applies to both, but with significant structural variations between them.

General Takaful

General Takaful covers short-term risks — motor, property, liability, marine, medical, and other non-life categories. The structural features are:

• Annual contribution periods, with surplus calculated and distributed annually
• The entire contribution (minus the Wakala fee) enters the PRF as Tabarru — there is no individual savings component
• Claims are paid from the PRF, which is replenished annually through new contributions
• Surplus distribution follows the operator's disclosed policy — typically to participants who did not claim, in proportion to their contributions

Family Takaful

Family Takaful covers long-term risks including death, disability, and critical illness, and typically incorporates a savings or investment component. The structural features are more complex:

• Contributions are split between the Tabarru component — which enters the PRF for mutual risk coverage — and the savings/investment component — which is credited to the individual participant's Personal Investment Account (PIA)
• The PIA is the participant's own fund, invested in Sharia-compliant instruments, and returned to them (with investment returns) at maturity or on surrender of the policy
• The PRF covers the mortality and morbidity risk — paying death benefits, critical illness claims, and disability payments to affected participants
• At maturity or death, the participant or their estate receives both the PIA balance and any applicable benefit from the PRF
• The long-term nature of Family Takaful creates more complex asset-liability matching requirements and greater actuarial complexity than General Takaful

The Leadership Dimension: Why Ethical Leadership Is Inseparable from Takaful Governance

The Takaful model is, at its foundation, an ethical construct. It is built on the principle of mutual assistance — participants helping each other in times of need, through a system that is transparent, equitable, and free from the prohibited elements of conventional insurance. Leading a Takaful organisation means leading an institution whose ethical commitments are not separate from its commercial objectives — they are its commercial proposition.

That makes the quality of leadership in Takaful organisations both more important and more complex than leadership in conventional financial institutions. Leaders must be commercially competent, Sharia-literate, regulatorily astute, and genuinely committed to the participant-centric principles that give the model its legitimacy. Those who treat Takaful as conventional insurance with a different legal structure will make decisions that are commercially logical and institutionally corrosive. Those who understand what the model is actually trying to achieve — and build organisations that achieve it — are the ones who build sustainable, trusted, genuinely Islamic financial institutions.

The Islamic Finance Leadership: Bridging Ethics, Sharia, and Success course at COPEX Training is built around exactly this challenge — equipping leaders in Islamic financial institutions with the ethical leadership framework, Sharia governance understanding, and decision-making discipline required to lead organisations that are genuinely aligned with Islamic values, not merely compliant in form.

For professionals building comprehensive expertise across the Takaful and Islamic finance disciplines — from the structural mechanics of contribution and fund management through to governance, investment, and leadership — the Islamic Finance & Takaful Training Courses at COPEX Training provide the structured professional development that covers the full scope of knowledge the sector demands.

Frequently Asked Questions

What is Takaful and how does it work?

Takaful is an Islamic alternative to conventional insurance, structured on the principle of mutual assistance. Participants contribute to a shared fund — the Participants' Risk Fund — on the basis of Tabarru (voluntary donation), from which claims are paid to those who suffer covered losses. A Takaful operator manages the fund for a fee rather than underwriting risk on its own balance sheet. Any surplus remaining in the fund after claims and expenses belongs to the participants, not to the operator's shareholders. This structure removes the elements of conventional insurance — Gharar, Maysir, and Riba — that render it non-compliant with Sharia.

What is the difference between Takaful and conventional insurance?

The fundamental difference is ownership and risk. In conventional insurance, the policyholder pays a premium and the insurer owns it, bearing the underwriting risk and keeping any profit. In Takaful, the participant makes a Tabarru contribution to a collective pool that the participants collectively own. The operator manages it for a fee. Risk is shared among participants mutually, not transferred to a commercial underwriter. Any surplus belongs to participants, not shareholders. The legal, financial, and governance structures that follow from this difference are significant and affect every aspect of how the two models operate.

What is Tabarru in Takaful?

Tabarru is the Arabic term for a voluntary donation or gift. In Takaful, participants contribute to the risk fund on the basis of Tabarru — they donate their contribution for the purpose of mutual assistance, without expectation of a contractual return. This is the mechanism that removes the Gharar problem from the insurance contract: the participant is not entering a bilateral contract with uncertain obligations, they are making a donation to a mutual fund. The Tabarru basis is the legal and Sharia foundation of the Takaful contribution.

What is the Participants' Risk Fund in Takaful?

The Participants' Risk Fund (PRF) is the common pool into which participants' Tabarru contributions flow and from which claims are paid. It is owned collectively by the participants, not by the Takaful operator. The operator manages it but does not own it. The PRF is kept strictly separate from the Shareholders' Fund — the operator's own capital — at all times. Investment returns generated within the PRF are credited back to it. Any surplus at the end of an accounting period belongs to the participants and is either distributed to them or retained in the fund as a reserve.

What is Takaful surplus and how is it distributed?

Takaful surplus is the amount remaining in the Participants' Risk Fund after all claims, retakaful costs, management expenses, and claims provisions are deducted. Because the PRF belongs to the participants, the surplus also belongs to them. Distribution policies vary by operator and model: some distribute the full surplus to participants who did not make claims during the period, in proportion to their contributions; others retain a portion as a reserve and distribute the remainder; others carry the full surplus forward as a reserve against future adverse experience. The distribution policy must be disclosed to participants in advance and approved by the Sharia Supervisory Board.

What is the difference between the Wakala and Mudarabah Takaful models?

In the Wakala model, the operator charges a fixed percentage fee on contributions received — the Wakala fee — as compensation for its management services. Any surplus in the PRF after this fee belongs entirely to the participants. In the Mudarabah model, the operator takes no fixed fee but instead receives a pre-agreed share of any surplus generated by the fund. In the hybrid Wakala-Mudarabah model — now the most common internationally — the operator charges a Wakala fee on contributions for underwriting management and a Mudarabah profit share on investment returns for investment management, with the underwriting surplus belonging entirely to participants.

What is a Qard Hassan in Takaful?

A Qard Hassan is an interest-free loan. In Takaful, the operator is obligated to provide a Qard Hassan from the Shareholders' Fund to the Participants' Risk Fund if the PRF falls into deficit — when claims exceed contributions and investment returns. The loan carries no interest, consistent with Sharia principles. Future surpluses in the PRF are used to repay the Qard Hassan before any surplus is distributed to participants. The Qard Hassan obligation is the mechanism through which Takaful shareholders bear the risk of establishing an operation whose fund may underperform.

What is the difference between General Takaful and Family Takaful?

General Takaful covers short-term non-life risks — motor, property, liability, medical — on annual contribution periods, with the entire contribution (after fees) entering the Participants' Risk Fund as Tabarru. Family Takaful covers long-term life and savings risks, with contributions split between a Tabarru portion that enters the risk fund and a savings/investment portion credited to the individual participant's Personal Investment Account (PIA). The PIA belongs to the participant individually and is returned to them at maturity or on death. Family Takaful is structurally more complex than General Takaful due to its long-term nature, savings component, and more demanding actuarial requirements.

What is Retakaful and why does it matter?

Retakaful is the Sharia-compliant equivalent of conventional reinsurance. Takaful operators transfer portions of their risk concentration to Retakaful operators through the same Tabarru contribution mechanism used in primary Takaful — the primary operator contributes to the Retakaful pool rather than paying a conventional reinsurance premium. Retakaful enables Takaful operators to manage large or catastrophic risk exposures without breaching their Sharia compliance obligations. The Retakaful market remains smaller than the conventional reinsurance market, creating capacity constraints in some markets that operators must manage carefully.

Who governs a Takaful operator and how?

Takaful operators are governed through a dual governance structure. Corporate governance is provided by the Board of Directors, which oversees strategy, risk management, financial controls, regulatory compliance, and the protection of participants' and shareholders' interests. Sharia governance is provided by the Sharia Supervisory Board, an independent panel of qualified scholars that approves products, monitors Sharia compliance, issues fatawa on specific questions, and publishes an annual Sharia compliance report. Both governance bodies are necessary — corporate governance without Sharia governance fails the Islamic basis of the model; Sharia governance without effective corporate governance fails the institutional standards that regulators and participants require.